Construction Spending Up Slightly in October

The U.S. Census Bureau announced that construction spending during October 2020 was estimated at a seasonally adjusted annual rate of $1,438.5 billion, 1.3% (±1.0%) above the revised September estimate of $1,420.4 billion. The October figure is 3.7% (±1.3%) above the October 2019 estimate of $1,386.8 billion. 

During the first 10 months of this year, construction spending amounted to $1,189.6 billion, 4.3% (±1.0%) above the $1,140.4 billion for the same period in 2019. 

The estimated seasonally adjusted annual rate of public construction spending was $344.8 billion, 1.0% (±1.6%) above the revised September estimate of $341.4 billion. 

Highway construction was at a seasonally adjusted annual rate of $92.6 billion, 1.6% (±4.3%) above the revised September estimate of $91.2 billion. Educational construction was at a seasonally adjusted annual rate of $86.4 billion, 1.1% (±2.5%) above the revised September estimate of $85.4 billion. 

Private construction spending was at a seasonally adjusted annual rate of $1,093.7 billion, 1.4% (±0.7%) above the revised September estimate of $1,078.9 billion.

  • Residential construction was at a seasonally adjusted annual rate of $637.1 billion in October, 2.9% (±1.3%) above the revised September estimate of $619.1 billion. 
  • Nonresidential construction was at a seasonally adjusted annual rate of $456.6 billion in October, 0.7% (±0.7%) below the revised September estimate of $459.9 billion. 

“The October spending report shows private nonresidential construction is continuing to slide,” said Ken Simonson, Associated General Contractors of America chief economist. “Public construction spending has fluctuated in recent months but both types of nonresidential spending have fallen significantly from recent peaks this year and appear to be heading even lower.”

Association officials said demand for nonresidential construction was unlikely to rebound in the near-term without new federal relief measures, putting additional construction careers at risk. These should include new investments in infrastructure, to improve aging roads and bridges, public buildings and water utility networks. Federal officials should refrain from taxing Paycheck Protection Program loans as it would undermine the benefits of that program. And Congress and the administration should work together to enact liability reforms to protect honest firms from frivolous coronavirus lawsuits.

“As long as the coronavirus undermines private sector confidence and public sector budgets, the only way to save good-paying construction careers is through new federal relief measures,” said Stephen E. Sandherr, the association’s chief executive officer. “Fixing the nation’s infrastructure, preserving the benefits of the PPP program and protecting honest employers will give the economy a much-needed short-term boost.”

“Excluding some of the emergency construction, such as temporary expansions to healthcare capacity, that transpired in October due to increasing cases of COVID-19, nonresidential construction spending actually declined for the month,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “Spending weakness was broad-based but was especially apparent in private construction segments, such as lodging, office and power. Construction spending in the commercial segment has remained flat on a year-over-year basis, with spending on fulfillment center construction offsetting declining demand for the construction of stores. Commercial and institutional backlog is down 1.7 months since the beginning of the pandemic, according to ABC’s Construction Backlog Indicator, suggesting that declining commercial activity will eventually become apparent within the spending data.

“The near-term outlook is tilted toward the negative as the economic momentum that has been apparent since May begins to wane,” said Basu. “A near-term recession is possible, and perhaps even probable, as shutdown measures are renewed and the impact of previously implemented stimuli continues to fade. That will further delay the recovery of construction spending.

“The longer-term outlook is decidedly more upbeat,” said Basu. “At some point, there will likely be a combination of additional stimuli (including money for infrastructure) and widespread vaccine availability. Recent announcements by Moderna, Pfizer, Astra Zeneca and others have rendered it clear that COVID-19 can be soundly defeated. It is also likely that, at some point in 2021, the economy will take off. As air travel, restaurants and theaters begin to rebound, the recovery to come may be more impressive than the recovery that has occurred over the past six months. That should set the stage for better nonresidential construction spending dynamics in 2022 and 2023.”

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